Rule to come into effect from April 1; misselling fears rise
Hyderabad: Come April 1, insurance companies can appoint agents, who don’t have a license from the insurance regulator — a move which is seen as giving fexibility to insurance companies, but also raises fears of misselling by not well qualified agents.
“This year one of the major changes that we were working upon is to allow appointment of individual agents by companies. This means agents will be appointed by the company. I expect the new system to begin from April 1,” said T.S. Vijayan, the chairman of Insurance Regulatory Development Authority of India (IRDA).
In 2000, IRDA had mandated agents to clear an exam conducted by the regulator, if they wish to act as insurance agents. This was done to prevent unqualified agents misselling products, out of their sheer inability to understand insurance products being sold or their inability to explain the products to the buyers.
According to a research paper of Indira Gandhi Institute of Development Research (IGIDR), people have lost about Rs 1.5 trillion ($28 billion), owing to mis-selling of insurance producrs over the 2004-05 to 2011-12.
Speaking about the FDI in insurance sector, Mr Vijayan said that they are awaiting the second set of rules from the government. “We may allow the branches of foreign companies to be set up in the country, which is not allowed now,” he said.
The government has decided to allow higher foreign direct investment (FDI) in the insurance sector to promote faster insurance penetration in the country. According to a McKinsey report, the insurance penetration in India is now at around 3.5 to 4 per cent and it may go up to 6 per cent in the coming five to six years.
“We should welcome capital from wherever it comes. A large number of companies need capital to breakeven,” he said.
( Source : dc correspondent )
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